UK inflation unexpectedly holds at 3.8%
By Abigail Townsend
Date: Wednesday 22 Oct 2025
(Sharecast News) - The rate of inflation was unchanged in September, official figures showed on Wednesday, after a jump in airfares was offset by lower prices elsewhere.
The cost of food and drink also fell for the first time since May 2024.
According to the Office for National Statistics, the consumer prices index rose by 3.8% in the 12 months to September 2025, unchanged on August.
The rate remains above the Bank of England's long-term target of 2%.
However, it was also better than expected, with most analysts forecasting an increase to 4%.
Core inflation, which strips out the most volatile elements of energy, food, alcohol and tobacco, rose 3.5%, down from August's 3.6%. CPI including housing costs was 4.1%, also unchanged on August.
Grant Fitzner, chief economist at the ONS, said: "The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year.
"These were offset by lower prices for a range of recreational and cultural purchase, including live events. The cost of food and non-alcoholic drinks also fell."
Food and non-alcoholic drink prices, which have soared in recent months, rose by 4.5%, down on August's 5.1% spike.
The print will provide some relief for chancellor Rachel Reeves, who is due to present her Budget next month.
It also boosted expectations for an sooner-than-expected rate cut, with the yield on 10-year gilts falling to the lowest level since December in response.
The Monetary Policy Committee has cut rates three times this year, to 4%. But it has now left rates on hold since August, because of persistently sticky inflation.
Martin Sartorius, principal economist at the Confederation of British Industry, said: "While some members may prefer to keep rates on hold, given the recent uptick in inflation expectations, September's softer reading could give the broader committee greater confidence to reduce rates without risking further persistence in price pressures."
Joshua Mahony, chief market analyst at Scope Markets, said: "With the monthly CPI metric coming in at 0%, the pace of inflation for the past five months is consistent with a return to 2%.
"Unsurprisingly, we have seeing increased calls for easing from the BoE, with markets now shifting forward the timing of the next rate cut from February to December."
However, Hal Cook, senior investment analyst at Hargreaves Lansdown, said: "We think the market has over-reacted this morning: inflation is still nearly doubt the BoE target, and Andrew Bailey has been clear that future rate cuts will be made in a considered fashion.
"There's also a risk that the upcoming Budget towards the end of November could change things."
Danni Hewson, head of financial analysis at AJ Bell, said: "For the chancellor, these figures should be gingerly welcomed.
"It means benefits will likely be uprated next April by slightly less that had been expected, and the cost of servicing all that debt will also be impacted by cooler inflation and the potential of further interest rate cuts."
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